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2025 (7) TMI 624 - HC - GSTLevy of GST - rental income received by the landlord from a tenant in respect of accommodation in a hotel (commercial accommodation) on the declared tariff per unit per day - legal onligation of Department of Home (the tenant herein) to disburse the agreed rental along with GST to the landlord - HELD THAT - The tariff per unit per day in respect of the hotel accommodation of the petitioner has been fixed by the Government on the recommendations made by the Rent Assessment Committee much prior to the year 2017 when the GST regime was not implemented. It is thus obvious that the levy of GST was not contemplated while fixing the tariff by the Rent Assessment Committee. With the implementation of GST regime and enforcement of Central CGST Act and Jammu and Kashmir GST Act the income derived by the petitioner and other hoteliers who had rented out their hotel accommodation to Government for accommodating its security forces is now taxable @ 12%. Also the fact cannot be lost sight that despite repeated requests and representations made by the hoteliers similarly situated with the petitioner the rent has not been revised since 2013. Be that as it may the fact remains that the rental income received by the petitioner and other similarly situated hoteliers is now exigible to GST and therefore it is the liability of the Department of Home to reimburse such amount. The invoices of rent will thus have the rental fixed by the Government on the recommendation of the Rent Assessment Committee plus the GST as applicable. This amount of GST to be collected by the petitioner from the Department of Home is thereafter required to be deposited with the GST authorities to fulfill the legal obligation of paying the GST on the services supplied. The petitioner is liable to pay GST on the rental income which he is receiving from the Department of Home in respect of the hotel accommodation of petitioner hired by the Department of Home. The petitioner therefore shall be legally bound to seek appropriate registration under the CGST/Jammu and Kashmir GST Act and deposit the service tax at the prescribed rate with the GST authorities - Petition disposed off.
1. The primary legal questions considered by the Court are:
(i) Whether rental income received by a landlord from a tenant for commercial accommodation in a hotel, based on the declared tariff per unit per day, is subject to Goods and Services Tax (GST) under the Jammu and Kashmir GST Act, 2017? (ii) If the rental income is taxable under GST, whether the tenant-in this case, the Department of Home-is legally obligated to pay the GST amount in addition to the agreed rent to the landlord? 2. Issue-wise detailed analysis: Issue (i): Taxability of rental income from hotel accommodation under GST Relevant legal framework and precedents: The Court examined the Jammu and Kashmir Goods and Services Tax Act, 2017 (J&K GST Act), particularly Section 7 which defines "supply" to include rental or lease of goods or services made for consideration in the course or furtherance of business. The Central Goods and Services Tax Act, 2017 (CGST Act) contains similar provisions. Notifications issued under the GST regime were also relevant, notably:
Court's interpretation and reasoning: The Court held that renting hotel rooms for consideration is a supply of service taxable under GST. The inclusive definition of "supply" under Section 7 of the J&K GST Act clearly encompasses rental or lease transactions. The Court rejected any argument that renting hotel accommodation to the Government would not constitute a taxable supply of service. Key evidence and findings: The petitioner admitted liability to pay GST on rental income. The fixed rent of Rs. 300/- per room per day was determined in 2013 before the GST regime was implemented, and thus did not include GST. The Government had not revised the rental rates since then despite repeated requests. Application of law to facts: With the removal of the exemption in 2022 notifications, the rental income derived from hiring hotel accommodation-even below Rs. 1000/- tariff-is taxable at 12%. The petitioner's rental income from the Department of Home is therefore subject to GST. Treatment of competing arguments: The petitioner contended that since the rent was fixed before GST implementation, the GST element should not be included or payable by the Government. The Court disagreed, emphasizing that the tax liability arises with the supply of service under the GST regime, regardless of when the rent was fixed. Conclusion: The rental income received by the petitioner from the Government for hotel accommodation is exigible to GST at the prescribed rate of 12%. Issue (ii): Obligation of the Department of Home to pay GST in addition to rent Relevant legal framework and precedents: Section 31(2) of the J&K GST Act and the CGST Act impose the liability on the supplier of taxable services to charge GST while issuing invoices and deposit the tax with the Government. However, the question arose whether the tenant (Department of Home) must reimburse the GST amount to the landlord in addition to the fixed rent. Court's interpretation and reasoning: The Court reasoned that since the rent was fixed without any provision for GST, and the GST regime came into effect subsequently, the GST element must be paid over and above the fixed rent. The Department of Home, as the tenant, is liable to reimburse the GST amount to the landlord to enable the latter to fulfill his legal obligation to deposit GST with the authorities. Key evidence and findings: The Government had not revised the rent since 2013 despite representations. The GST authorities demanded GST payment from the petitioner, who cannot absorb the tax without reimbursement from the tenant. Application of law to facts: The Court ordered that the Department of Home shall pay the GST amount in addition to the rent fixed per room per day, and the petitioner shall register under the GST Acts to collect and deposit the tax. Treatment of competing arguments: The petitioner's argument that the Government should pay GST was accepted, but the Court clarified that the payment of GST is the petitioner's legal obligation as supplier, while the reimbursement of GST by the tenant is a commercial arrangement necessitated by the changed tax regime. Conclusion: The Department of Home is legally obligated to pay GST in addition to the fixed rent to the petitioner. Additional observations and directions: The Court observed that the Government should constitute a proper Rent Assessment Committee to revise the rent payable to hoteliers, as the rent has remained unchanged since 2013. The Court directed that from August 2025 onwards, the Department of Home shall pay GST in addition to rent, and the petitioner must complete GST registration by 31st July 2025 to enable collection and deposit of GST with authorities. 3. Significant holdings: "The leasing or renting out of a commercial property is undoubtedly a supply of service taxable under the GST regime." "The rental income received by the petitioner and other similarly situated hoteliers is now exigible to GST and, therefore, it is the liability of the Department of Home to reimburse such amount." "The invoices of rent will thus have the rental fixed by the Government on the recommendation of the Rent Assessment Committee plus the GST as applicable." "The petitioner is liable to pay GST on the rental income which he is receiving from the Department of Home... The petitioner shall be legally bound to seek appropriate registration under the CGST/Jammu and Kashmir GST Act and deposit the service tax at the prescribed rate with the GST authorities." "The Department of Home, Government of Jammu and Kashmir, shall be liable to pay the prescribed rate of GST in addition to the rent payable to the petitioner per room per day as determined by the Government from time to time." The Court's final determinations are that the rental income from hotel accommodation is subject to GST at the prescribed rate; the landlord must register and deposit GST with authorities; and the tenant (Department of Home) must reimburse GST in addition to rent. The Court also called for revision of rent by the Government through a proper Rent Assessment Committee.
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